The study evaluates the two historical major labor relation reforms and analyzes awareness of the labor market functions in Korea, in order to explore future directions for labor management relations. The democratization movement of 1987 and the subsequent June 29 Declaration started union movements in Korea, and in the mid 1990s, demands were made for improving the Labor Act for the nation’s accession to the OECD. As a result, the Labor Act was revised in 1997 and marked a significant turning point for labor relations in Korea. Many assume the labor relations reform of 1987 had stiffened the labor market and distorted the price mechanism, but after the reform, the price mechanism functions properly and market stiffening was not serious. However, other issues emerged following active labor movements, such as wage gaps between large companies and SMEs, and unfair labor management practices. Therefore it is necessary to execute institutional reforms in order to strengthen market functions. The study concludes with the policy suggestions that from a long-term perspective: in order to improve labor management relations, trade union regulations should be relaxed to an extent that it could be enforced in the field, while labor markets should be more flexible so that labor unions can be regulated by the market.